Iowa Hotel Ass'n v. State Bd. of Regents

• Decision Date: 03 April 1962
• Docket Number: No. 50593,50593
• Citation: 253 Iowa 870,114 N.W.2d 539
• Parties: The IOWA HOTEL ASSOCIATION, a Corporation, Iowa Motor Court Association, a Corporation, Iowa Restaurant Association, a Corporation, Hawkeye Lodge, a Partnership, Russell D. Miller and L. E. Smith, Partners, Ermal Logry, John Teufel, Mary Teufel, Viola Lons, and Michael McLaughlin, Appellants, v. The STATE BOARD OF REGENTS, Harry H. Hagemann, President of the State Board of Regents, David A. Dancer, Secretary of the State Board of Regents, Flave L. Hamborg, Treasurer of the State University of Iowa, and Elwin T. Jolliffe, Business Manager of the State of University of Iowa, Appellees.
• Court: Iowa Supreme Court

Page 539

114 N.W.2d 539

253 Iowa 870

The IOWA HOTEL ASSOCIATION, a Corporation, Iowa Motor Court Association, a Corporation, Iowa Restaurant Association, a Corporation, Hawkeye Lodge, a Partnership, Russell D. Miller and L. E. Smith, Partners, Ermal Logry, John Teufel, Mary Teufel, Viola Lons, and Michael McLaughlin, Appellants, v. The STATE BOARD OF REGENTS, Harry H. Hagemann, President of the State Board of Regents, David A. Dancer, Secretary of the State Board of Regents, Flave L. Hamborg, Treasurer of the State University of Iowa, and Elwin T. Jolliffe, Business Manager of the State of University of Iowa, Appellees.

No. 50593.

Supreme Court of Iowa.

April 3, 1962.

Gibson, Stewart & Garrett, Des Moines, for appellants.

Evan Hultman, Atty. Gen., of Iowa, Arthur O. Leff, Iowa City, and Herschel G. Langdon, Des Moines, Special Counsel, for appellees.

SNELL, Justice.

This is an action in equity to enjoin the state board of regents from proceeding with the construction and financing of additions to the Iowa Memorial Union at the State University of Iowa under the provisions of Chapter 185, Laws of the Fifty-eighth General Assembly. Plaintiffs allege that the law violates the Constitution of the state of Iowa and that the proposed facilities are not authorized or within the power of the board of regents or the state of Iowa.

Chapter 262 of the Code, as amended, provides for a state board of regents to govern the State University of Iowa, Iowa State University of Science and Technology, State College of Iowa and other institutions of learning and service to the people.

Chapter 185, Laws of the Fifty-eighth General Assembly, entitled 'Self-Liquidating College Buildings', authorizes the state board of regents to set aside and use such portions of the respective campuses of the institutions of higher education under its control as the board shall determine to be suitable for the construction thereon of self-liquidating and revenue producing buildings and facilities, which the board deems necessary for the comfort, convenience and welfare of students and suitable for the purposes for which the institutions were established, including student unions, recreational buildings, auditoriums * * * and additions to or alterations of existing buildings or structures now or hereafter used for any or all of the purposes aforesaid. The law declares the erection of such buildings, improvements and facilities for educational institutions of higher learning to be a public necessity. The title to all real estate so acquired and improvements erected thereon shall be in the name of the state.

Under this law the board of regents is authorized to charge and collect from all students in attendance, or from any specified class or part thereof for which facilities are deemed necessary, fees and charges for the use and availability of such buildings and facilities and for the services and benefits made available therefrom. The fees and charges shall be applied to the costs of acquisition, construction, maintenance and financing of the improvements.

In carrying out the powers the board is authorized to borrow money on the credit of the income and revenues to be derived from the operation or use of the facilities and from fees or charges made by the board to students for whom such facilities are made available and to issue notes, bonds or other evidence of indebtedness in anticipation of the collection of such income, revenues, fees and charges, and pledge the same for the discharge of the indebtedness.

The law specifically provides that no obligation created thereunder shall ever be or become a charge against the state of Iowa.

The last section of the law provides: 'All such self-liquidating projects under this Act shall be first approved by the budget and financial control committee.' I.C.A. § 262.53.

The Iowa Memorial Union on the campus at the State University of Iowa in Iowa City is composed of what is known in the record as units I, II and III. These units were constructed, built and paid for by the Iowa Memorial Union Corporation, a private corporation, and thereafter were conveyed to the state of Iowa for the use and benefit of the state university. These units were completed in 1926, 1927 and 1955, respectively. The board of regents now proposes, under the authority of Chapter 185, Laws of the Fifty-eighth General Assembly, the construction of additions known as units IV, V and VI. Unit IV, as proposed, will be a ground floor and first floor addition. Unit V will be constructed above and on unit IV and will consist of three additional floors. Unit VI will be constructed above and on the present unit III. The units will be connected by halls. There will be elevator service (self-service) to the upper floors.

The proposed construction has been under consideration by the university authorities and the board of regents for several years. The board of regents in December 1959 approved the proposed project and asked approval by the budget and financial control committee of the legislature.

Negotiations for the financing of the improvements led to a commitment from institutional lenders to finance the cost not exceeding $4,500,000. The indebtedness so incurred was to be evidenced by notes issued by the board of regents maturing July 1, 1992, bearing interest at the rate of five per cent per annum payable semiannually. There will be 50 level semiannual payments of principal and interest. As security for the loan the board of regents and the Iowa Memorial Union are to pledge allocated student fees, together with net revenues from Iowa Memorial Union activities, for the payment of the notes. The board of regents covenants to charge, collect and allocate to the payment of the notes University of Iowa student fees in an amount which, together with other net revenues of the Memorial Union, will be sufficient to pay the principal and interest in accordance with the mandatory amortization schedule. Under this plan the board of regents, through the university, will assess student fees in the amount of $8.50 per student per semester or $17 per academic year and $4.00 per summer quarter attended. Approximately 75 per cent of the total cost for the debt retirement will be met by these student fees and approximately 25 per cent from the operating income of the Memorial Union. The percentages of income derived from various sources are estimates and vary slightly but are sufficiently accurate for the purposes of this case.

The budget and financial control committee of the Fifty-eighth General Assembly approved the project on January 6, 1960.

Proposed unit IV is essentially a new food service unit with kitchen, dining rooms, storage facilities, lockers and equipment facilities.

Proposed unit V is essentially a guesthouse section with both double and single rooms, elevator service, cleaning service and maid service. University guests will be eligible to stay in the guest rooms. These include organization personnel, faculty, guest speakers, guest instructors, visiting orchestras, athletic teams, lecturers, alumni and groups brought to the campus for specific purposes.

Proposed unit VI will consist of conference rooms, meeting rooms and a ballroom also serving as a banquet and meeting room. While the units are separately described, they will all be a part of one building.

Compliance with the provisions of the statute has not been challenged.

Plaintiffs, The Iowa Hotel Association, Iowa Motor Court Association, Iowa Restaurant Association, other resident tax payers and a student at the university, seek injunctive relief, urging that the law under which the regents are proceeding violates the Constitution of the state and that the proposed facilities are not authorized or within the power of the board of regents or the state of Iowa. Defendants ask for a declaration of constitutionality and legality of the proposed construction.

The trial court found that the provisions of Chapter 185, Laws of the Fifty-eighth General Assembly, and the proposed construction and financing by the board of regents do not violate any constitutional or statutory provisions of the law. Plaintiffs have appealed.

This action is in equity and triable de novo in this court.

As propositions relied on for reversal, plaintiffs urge that the action of the board of regents in approving and authorizing the construction and the method of financing and the provisions of Chapter 185 of the Laws of the Fifty-eighth General Assembly are unconstitutional, illegal and void in that they are repugnant to, and not in complianct with, the provisions of section 5 of Article VII of the Constitution, I.C.A.; that the proposed method of financing would create a debt of the state of $4,500,000, plus debt service; is the exercise of illegal and unconstitutional powers of the board of regents; and that the plan of paying off the debt and service charge is not self-liquidating in that approximately 75 per cent of the total debt is to be paid by student fees in the form of assessments against every student until the year 1992.

It is also urged that the law is an unconstitutional delegation of power and legislative authority to the board of regents and to the budget and financial control committee of the legislature. It is urged that the law purports to grant powers to the board of regents, an agency of the executive department, but requires that before the exercise of such powers can become effective they must be approved by the budget and financial control committee of the general assembly, a part of the legislative department of government, and that this offends the requirements of section 1 of Article III of the Constitution. This section establishes three separate departments of government and provides that no person charged with the exercise of powers properly belonging to one of these departments shall exercise any function appertaining to either of the others.

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